China Studying Cap-And-Trade System to Cut Emissions

Nov. 18 (Bloomberg) -- China, the world’s biggest polluter,
is studying a cap-and-trade system to help cut greenhouse gas
emissions, said an official at a state-run research center.

The government may set emissions quotas for large
enterprises and a certain portion of them may be traded, Zhang
Junkuo, head of development strategy at the State Council’s
development research center, told reporters in Beijing today.

The world’s fastest-growing major economy has pledged to
reduce its carbon-dioxide output per unit of gross domestic
product by as much as 45 percent through 2020 compared with 2005
levels. The cap-and-trade study is still in the early stages and
is being considered among other options including a carbon tax,
Zhang said.

“It’s likely that China will introduce some kind of cap-and-trade system, although it’s not clear when and how it will
operate yet,” said Wang Fan, an analyst at Ping An Securities
Ltd. in Shenzhen. “The idea of a carbon tax seems much more
unlikely to me, as China is a developing nation and I don’t
think there’s much support for this idea.”

Tokyo and New Zealand are the only carbon-trading markets
in the Asia-Pacific region. The European Union, which manages
the world’s biggest cap-and-trade system, sent a mission to
China in July to study a pilot carbon-trading program.

In Australia, Prime Minister Julia Gillard vowed to restart
an effort to cut emissions after replacing Kevin Rudd in June. A
committee that Gillard set up in September to explore ways of
introducing a carbon price has held its first meetings. The
country, which gets 80 percent of its power from coal, aims to
source 20 percent of its electricity from renewable energy by
2020.

Curbing Emissions, Energy

A cap-and-trade market in China could be functioning as
early as 2013, Richard Sandor, who helped found London-based
Climate Exchange Plc in 2003, said at a climate-change forum in
Hong Kong this month.

China may spend about 5 trillion yuan ($750 billion) in the
next decade developing cleaner sources of energy to reduce
emissions from burning oil and coal, Jiang Bing, head of the
National Energy Administration’s planning and development
department, said on July 20.

Premier Wen Jiabao has set a goal of cutting energy
consumption per unit of GDP by 20 percent in the five years
ending 2010. China may announce a new target in the next annual
meeting of the National People’s Congress in March, Zhang said.

Cap-and-trade puts a price on carbon by setting limits on
the amount of emissions that polluters can produce. Those
exceeding the limit must buy credits to offset their emissions,
while those that emit less can sell their balance in the carbon
market.